Brutal truth for bankers is they’re expendable

What happens to a global financial centre when hundreds of thousands of residents head for the door? The jury is still out on London after its Brexit- and pandemic-inspired exodus. Now it’s Hong Kong’s turn to pose the question.
The UK started taking applications from January 31 under a new immigration program for Hong Kong residents, introduced in response to a national security law that was enacted by China’s legislature last June. The British government calls the law a “clear and serious breach” of the Joint Declaration that governed the former colony’s return to Chinese sovereignty in 1997, which guaranteed that Hong Kong’s rights, freedoms and way of life would remain unchanged for 50 years.
The numbers are staggering. The UK’s central case is for 321,600 visa applications over the coming five years, with a high-end estimate of 1.05 million, equal to 14% of Hong Kong’s 7.5 million population.
Money is already leaving, with Bank of America Corp estimating that emigration-related outflows to the UK alone could reach $36 billion this year, Denise Wee and Katharine Gemmell of Bloomberg News reported last week. Ordinary savers have been alarmed by reports of banks freezing the accounts of pro-democracy activists and family members under the security law, which was imposed on Hong Kong without debate in the city’s legislature, they wrote.
That looks disquieting, until set in the context of Hong Kong’s overall bank deposits, which totaled $14.6 trillion at the end of November (the most recent date for which data are available). On that basis, an outflow of $36 billion would amount to barely a quarter of 1%.
To drive home why capital flight shouldn’t be a concern, at least in current conditions, consider this: Hong Kong bank deposits fell by more than $1 trillion from the end of October without even a murmur of distress on financial markets.
This was largely a product of the $35 billion Ant Group Co initial public offering, which caused subscription funds to flow in and then to exit when Chinese regulators aborted the world-record sale. Amid such capital volatility, measures of interbank liquidity remained as calm as a pond, with the Hong Kong Monetary Authority’s aggregate balance sticking close to a record high and the one-month Hong Kong interbank offered rate ending November at a rock-bottom 0.1%. The Hang Seng Index, the city’s benchmark stock gauge, rose 9.3% during the month.
Financial centres arise in response to wider economic forces, and these far outweigh the attributes of a city’s workforce — however sophisticated, well qualified and international in outlook they may be. Hong Kong developed into a financial centre to intermediate China’s need for capital and the world’s desire for returns. As long as that role still exists — and it very much does — then Hong Kong will remain relevant.
That doesn’t mean that an exodus on the scale envisaged will be damage-free. In London, rents have taken a hit from the departure of non-UK residents, as Bloomberg Opinion’s Marcus Ashworth and Stuart Trow wrote last week.

—Bloomberg